So, MIPIM has come and gone once more. And whilst the week was punctuated by updates of what was happening in the Brexit debacle, thankfully there was enough activity, excitement and substantive discussion taking place in Cannes that it was merely a conversational aside rather than a dominant theme of the conference.
Whilst investors’ enthusiasm for UK property seems to have waned somewhat, this allowed other areas to take centre stage and reinforce just why the UK is still a big influence in the world of real estate.
Some of the themes that repeatedly surfaced during MIPIM 2019 (albeit with a bias toward PropTech and the management of assets).
1. Environmental is now elemental
Whilst issues such as energy efficiency have been on the agenda for a number of years, they have never been as core to decision making as they are now. Environmental impact is now a fundamental element of feasibility studies not a marketing wrapper on finished product. This starts with location of potential developments, continues through the design phase, is an important part of the delivery process and then is further optimised once the properties are operating. This is likely to continue as the holding period for investors extends as a result of the increasing build-to-rent activity in the UK meaning that the operating costs have a greater impact on return than they previously did for developers who realised their returns upon completion.
2. Assets (and analysts) have to work harder
This is primarily a result of the fact that the ‘easy money’ has gone for property investors. The relative outperformance (and inflation hedging) that was associated with real estate investment looks less appealing in the face of slowing economies (particularly the German), uncertainty in the UK and the potential (though unlikely in my opinion) of rate rises. Whether you see it in the increased focus on space utilisation; the trend toward multi-use buildings (something beyond mixed-use categorisation … look out for the startup Selina as an example of this given their recent raise); the necessity for huge amounts of data to be incorporated into decision-making process to give competitive advantage, all these things point to the fact that technology and capital are pushing investors to work harder for their returns.
3. The office and social life boundaries have blurred
We (at HomyzePro) have always tried to push and participate in the ‘consumerisation’ of commercial real estate. The service level expectations no longer change when you enter the workplace and whether employers are trying to attract and retain talent, or elicit maximum productivity from employees by making it easier to stay at the office, the results are much the same. On-demand, ‘as a service’, hospitality-grade delivery etc. are all now part of the corporate environment. This will only continue.
4. Operational efficiency is going to increase in importance
Partly in relation to the reduced returns likely from real estate and partly as a function of the need to deliver high service levels to occupiers and tenants, asset managers will need to provide more for less. The only way that this can happen (whether they are property managers, estate agents or facilities managers) is if they improve their operational efficiency. Growing revenues is obviously everyone’s first defence against squeezed margins but this only leads to increased competition. Differentiation in the eyes of the customer, and being able to deliver greater value at lower cost is really the battleground.
It was a great few days (helped of course by the fact that the sun shone brightly throughout) and there were some awesome conversations to be had. That there was so much thoughtful analysis of the sector being conducted rather than just speed-dating and dealmaking was for me a great thing.
See you in 2020!
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